How To Do A Family Financial AssessmentNot starting a business with enough cash, known technically as being "undercapitalized", is probably second only to not researching your business concept as a major cause of small business failure. This outcome is usually
result of inadequate advance planning during pre-launch phase. First and foremost you must estimate what your family expenses are and how you will assure that your business income is sufficient to pay them. You should sit down with your family and honestly discuss minimum amount of money household must have each month to provide security. Ask each member of family to offer one or two areas where some expense can be reduced.
In addition to knowing your living costs, you must also be brutally honest about your current debt situation. During 1990's many families found themselves taking on increased debt in order to just get by. If your family is one of them, you should be realistic about your ability to take on more financial responsibility. New businesses almost always require more money to keep them running than new owners estimate before starting. Remember: every dollar you must pay each month for credit card payments is a dollar not available to invest in marketing your new company.
To help you calculate your current family financial situation you should create a worksheet, which I call: My Current Financial Situation. Listed below are categories to include. Some research among your household financial records may be required.
> Family Budget
Break your household expenses down into two groups:
- Fixed expenses. These are recurring expenses that don't change in dollar amount from month to month, such as your mortgage payment or auto loan payment. You may also be investing a fixed amount each month into a college savings plan.
